The longer you use Siri and Dictation, the better they understand you and the better they work. To help them recognize your pronunciation and provide better responses, certain information such as your name, contacts, and songs in your music library is sent to Apple servers using encrypted protocols.
However, and this is an important point, all the data is encrypted. Further in that same policy statement is this:
That said, Siri and Dictation do not associate this information with your Apple ID, but rather with your device through a random identifier. Apple Watch uses the Siri identifier from your iPhone. You can reset that identifier at any time by turning Siri and Dictation off and back on, effectively restarting your relationship with Siri and Dictation. When you turn Siri and Dictation off, Apple will delete the User Data associated with your Siri identifier, and the learning process will start all over again.
So you have the ability to control what info is sent to Apple, how they use it, as well as being able to reset your unique identifier.